What once was old is new again – NSW Supreme Court considers the operation of the 10 year limitation period under the EPA Act in Sydney Capitol Hotels Pty Ltd v Bandelle Pty Ltd [2019] NSWSC 1825 (Sydney Capitol Hotels)

On 2 January 2017, a fire broke out on the ground floor of the building at 730-743 George Street, Sydney. The fire subsequently triggered an emergency sprinkler system on level 5 of the building, damaging the plaintiff’s property. 

The plaintiff sued the builder of the ground floor in negligence. In its defence, the builder relied on section 6.20 of the Environmental Planning and Assessment Act 1979 which provides that “[a] civil action for loss or damage arising out of or in connection with defective building work… cannot be brought more than 10 years after the date of completion of the work”.

The plaintiff acknowledged that the works were completed more than ten years earlier, and therefore that if section 6.20 applied, it barred its claim against the builder.

Notwithstanding that, it relied on Bongiorno J’s decision in Australian Rail Track Corporation Ltd v Leighton Contractors Pty Ltd [2003] VSC 189  and the NSW’s Court of Appeal’s decision in Dinov v Alliance Australia Insurance Limited (2017) 96 NSWLR 98 to argue that the section 6.20 should be construed narrowly so as only to protect a party who does defective building work from a claim by a person with whom that party contracted to do the work. 

The court found that the plaintiff’s claim was not statute barred.  In doing so it noted that:

On the plain and grammatical meaning of the section, the damage suffered by the plaintiff arises out of or is in connection with the defective building work. That work was done pursuant to a contract and caused the fire, which in turn caused the damage suffered by the plaintiff.

Usually, the plain and grammatical meaning of words enacted by parliament is the best clue as to Parliament’s objective intention. One can readily appreciate the force of an argument that a builder should not be liable for defective building work ten years after it is done, irrespective of who suffers damage by it.

However, and albeit strictly obiter, the Court of Appeal has supported the reasoning in Australian Rail that the words should be given a restricted meaning. Although if I were deciding the matter afresh, I would reach a different conclusion, I do not consider that I should depart from this approach. Put another way, I think the approach is wrong so far as it applies here, but I do not think it is so clearly wrong that I should not follow it.

Taking this approach, the plaintiff was merely an occupier of part of the building where the fire occurred, as a consequence of which it suffered damage. That loss and damage was caused by the defective building work in only an accidental, incidental or indirect sense in the meaning contemplated by Bongiorno J and the Court of Appeal. Hence, the section does not apply.

The court expressly stated that it was not considering the application of these principles to successors in title, as the plaintiff was not “a successor in title to anyone”.  Given that section 18D of the Home Building Act 1989 (NSW) (and other statutory equivalents) provide successors in title of residential buildings with the benefit of statutory warranties implied in all domestic building contracts they may have a contractual cause of action that distinguishes their position from the position of the plaintiff in Sydney Capitol Hotels.

The parties did not appear to refer the Court to the Victorian Court of Appeal’s decision in Brirek Industries Pty Ltd v McKenzie Group Consulting [2014] VSCA 165 (see e.g. at [113]) which appears to be at odds with the approach taken by the New South Wales Supreme Court. If followed however, the decision could provide litigants with a loophole to avoid defences based on limitation periods, and substantially expand the nature and scope of claims that could be brought against builders for damage arising from defective works.

Bill Stephenson

Liability limited by a scheme approved under Professional Standards Legislation.

MTECC Breakfast Seminar

We would like to invite all our subscribers to MTECC’s inaugural breakfast seminar. The seminar will feature presentations by Nicholas Gallina (speaking on the High Court’s decision in Mann v Paterson Constructions Pty Ltd) and Andrew Downie (speaking on recent developments in limitation periods in building disputes) and will be chaired by Hugh Foxcroft QC.

Date: 11 March 2020 from 7:30am to 9:00am 
Location: Krimper Cafe, 20 Guildford Lane 

Please RSVP to miriam@chancery.com.au by Monday 2 March 2020 for catering purposes. 

More information can be found on our flyer here, or at our website https://mtecc.com.au/.

We look forward to seeing you there.